Government investment arm, the Botswana Development Corporation (BDC) is said to have approached the African Development Bank (AfDB) for a line of credit (LOC) of an amount close to one billion Pula.
The application of an external loan comes at a time when the corporation is said to have drawn a corporate strategy that seeks to diversify its funding mix and reduce its reliance on the government and short-term revolving credit lines financing while increasing longer term funding from borrowings.
On Friday, AfDB confirmed that its board has approved P850million Pula line of credit (LOC) to be invested in key economic sectors. The pan African development bank believes that the loan will help BDC to address its funding maturity mismatch challenges and align its on-lending terms with the needs of the target sectors and clients. In line with its strategy, BDC is expected to use the funds to finance key sectors such as agri-business, clean energy, services, infrastructure and manufacturing.
At the same time, AfDB also confirmed that the Botswana government has agreed to provide a sovereign guarantee to the credit facility which is intended to help diversify the country’s economic base.
In his past interaction with the media, BDC’s youthful Chief Executive Bashi Gaetsaloe indicated that going forward, the corporation will focus on commercially viable projects that pioneer new industries, unlock value in existing industries, stimulate private sector growth and linkages as well as driving diversification and exports and creating significant employment.
The BDC loan comes at a time when the government is battling a narrow economic base that is dominated by mining and the public sectors. In February, Finance minister Kenneth Matambo indicated that the domestic economic growth slowed down 3.2 percent in 2014 and further to 1.2 percent in 2015 due to weak demand for diamonds as well as electricity and water shortages.
At the same time the downturn in the global diamond market and its impact on the domestic economy prompted the Government to adopt the Economic Stimulus Programme (ESP) as a strategy to boost growth, promote economic diversification, and create jobs.
However AfDB believes that its loan to BDC will provide scarce and competitively priced long-term funding to enable the corporation to meet its growth and financing needs and complement efforts to mobilise resources from other sources.
“In line with the government’s ambitions, the LOC will support entrepreneurship, economic diversification and avail scarce long-term funding to critical sectors in Botswana as well as enable jobs and wealth creation and tax-revenue generation,” AFDB said on Friday.
Meanwhile the AFDB facility is expected to be complemented by a grant to strengthen the BDC’s implementation capacity, effectiveness and deliver institution’s implementation skills.